I think there is still surplus-according-to-the-funders-values in this impact market specifically, just as much as there is with regular grants. Retro funders were not asked to assign valuations based on their “true values” where maybe 1 year of good AI safety research is worth in the 7 figures (though what this “true value” thing would even mean I do not quite understand). Instead, they were asked to “operate on a model where they treat retrospective awards the same as prospective awards, multiplied by a probability of success.” So they get the same surplus as usual, just with more complete information when deciding how much to pay.
I can’t speak for Zach, but that’s not the meaning of “surplus” I had in mind above.
Suppose Funder’s bar is 10 utils per dollar. In standard operation, it will buy some work at 10 util/$, but will also have the chance to buy at 11 util/$, 12 util/$, and maybe even a little at 20 util/$. By surplus, I meant the extra 1 . . .2 . . . 10 util/$ that were above the funding bar. Because Funder was able to acquire utils on the cheap in these transactions, it can afford to acquire more utils within its budget.
If Funder bought impact certificates on a 10 util/$ basis, it wouldn’t have any surplus of this type. The fix may be that Funder should buy at its average weighted util/$ basis, which is higher than its funding bar. Of course, this requires the funder to figure out its average weighted util/$ in the relevant cause area, which might or might not be easy.
Ah, hooray! This resolves my concerns, I think, if true. It’s in tension with other things you say. For example, in the example here, “The Good Foundation values the project at $18,000 of impact” and funds the project for $18K. This uses the true-value method rather than the divide-by-P(success) method.
In this context “project’s true value (to a funder) = $X” means “the funder is indifferent between the status quo and spending $X to make the project happen.” True value depends on available funding and other available opportunities; it’s a marginal analysis question.
Bob has a project idea. The project would cost $10. A funder thinks it has a 99% chance of producing $0 value and a 1% chance of producing $100 value, so its EV is $1, and that’s less than its cost, so it’s not funded in advance. A super savvy investor thinks the project has EV > $10 and funds it. It successfully produces $100 value.
How much is the funder supposed to give retroactively?
I feel like ex-ante-funder-beliefs are irrelevant and the right question has to be “how much would you pay for the project if you knew it would succeed.” But this question is necessarily about “true value” rather than covering the actual costs to the project-doer and giving them a reasonable wage. (And funders have to use the actual-costs-and-reasonable-wage stuff to fund projects for less than their “true value” and generate surplus.)
(This is ultimately up to retro funders, and they each might handle cases like this differently.)
In my opinion, by that definition of true value which is accounting for other opportunities and limited resources, they should just pay $100 for it. If LTFF is well-calibrated, they do not pay any more (in expectation) in the impact market than they do with regular grantmaking, because 99% of project like this will fail, and LTFF will pay nothing for those. So there is still the same amount of total surplus, but LTFF is only paying for the projects that actually succeeded.
I think irl, the “true value” thing you’re talking about is still dependent on real wages, because it’s sensitive to the other opportunities that LTFF has which are funding people’s real wages.
There’s a different type of “true value”, which is like how much would the free market pay for AI safety researchers if it could correctly account for existential risk reduction which is an intergenerational public good. If they tried to base valuations on that, they’d pay more in the impact market than they would with grants.
This is ultimately up to retro funders, and they each might handle cases like this differently.
Oh man, having the central mechanism unclear makes me really uncomfortable for the investors. They might invest reasonably, thinking that the funders would use a particular process, and then the funders use a less generous process...
In my opinion, by that definition of true value which is accounting for other opportunities and limited resources, they should just pay $100 for it. If LTFF is well-calibrated, they do not pay any more (in expectation) in the impact market than they do with regular grantmaking, because 99% of project like this will fail, and LTFF will pay nothing for those. So there is still the same amount of total surplus, but LTFF is only paying for the projects that actually succeeded.
What happened to “operate on a model where they treat retrospective awards the same as prospective awards, multiplied by a probability of success.” Can you apply that idea to this case? I think the idea is incoherent and if not I want to know how it works. [This is the most important paragraph in this comment.] [Edit: actually the first paragraph is important too: if funders aren’t supposed to make decisions in a particular way, but just assign funding according to no prespecified mechanism, that’s a big deal.]
(Also, if the funder just pays $100, there’s zero surplus, and if the funder always pays their true value then there’s always zero surplus and this is my original concern...)
There’s a different type of “true value”, which is like how much would the free market pay for AI safety researchers if it could correctly account for existential risk reduction which is an intergenerational public good.
Sure. I claim this is ~never decision-relevant and not a useful concept.
I think there is still surplus-according-to-the-funders-values in this impact market specifically, just as much as there is with regular grants. Retro funders were not asked to assign valuations based on their “true values” where maybe 1 year of good AI safety research is worth in the 7 figures (though what this “true value” thing would even mean I do not quite understand). Instead, they were asked to “operate on a model where they treat retrospective awards the same as prospective awards, multiplied by a probability of success.” So they get the same surplus as usual, just with more complete information when deciding how much to pay.
I can’t speak for Zach, but that’s not the meaning of “surplus” I had in mind above.
Suppose Funder’s bar is 10 utils per dollar. In standard operation, it will buy some work at 10 util/$, but will also have the chance to buy at 11 util/$, 12 util/$, and maybe even a little at 20 util/$. By surplus, I meant the extra 1 . . .2 . . . 10 util/$ that were above the funding bar. Because Funder was able to acquire utils on the cheap in these transactions, it can afford to acquire more utils within its budget.
If Funder bought impact certificates on a 10 util/$ basis, it wouldn’t have any surplus of this type. The fix may be that Funder should buy at its average weighted util/$ basis, which is higher than its funding bar. Of course, this requires the funder to figure out its average weighted util/$ in the relevant cause area, which might or might not be easy.
Ah, hooray! This resolves my concerns, I think, if true. It’s in tension with other things you say. For example, in the example here, “The Good Foundation values the project at $18,000 of impact” and funds the project for $18K. This uses the true-value method rather than the divide-by-P(success) method.
In this context “project’s true value (to a funder) = $X” means “the funder is indifferent between the status quo and spending $X to make the project happen.” True value depends on available funding and other available opportunities; it’s a marginal analysis question.
Actually I’m confused again. Suppose:
Bob has a project idea. The project would cost $10. A funder thinks it has a 99% chance of producing $0 value and a 1% chance of producing $100 value, so its EV is $1, and that’s less than its cost, so it’s not funded in advance. A super savvy investor thinks the project has EV > $10 and funds it. It successfully produces $100 value.
How much is the funder supposed to give retroactively?
I feel like ex-ante-funder-beliefs are irrelevant and the right question has to be “how much would you pay for the project if you knew it would succeed.” But this question is necessarily about “true value” rather than covering the actual costs to the project-doer and giving them a reasonable wage. (And funders have to use the actual-costs-and-reasonable-wage stuff to fund projects for less than their “true value” and generate surplus.)
(This is ultimately up to retro funders, and they each might handle cases like this differently.)
In my opinion, by that definition of true value which is accounting for other opportunities and limited resources, they should just pay $100 for it. If LTFF is well-calibrated, they do not pay any more (in expectation) in the impact market than they do with regular grantmaking, because 99% of project like this will fail, and LTFF will pay nothing for those. So there is still the same amount of total surplus, but LTFF is only paying for the projects that actually succeeded.
I think irl, the “true value” thing you’re talking about is still dependent on real wages, because it’s sensitive to the other opportunities that LTFF has which are funding people’s real wages.
There’s a different type of “true value”, which is like how much would the free market pay for AI safety researchers if it could correctly account for existential risk reduction which is an intergenerational public good. If they tried to base valuations on that, they’d pay more in the impact market than they would with grants.
Oh man, having the central mechanism unclear makes me really uncomfortable for the investors. They might invest reasonably, thinking that the funders would use a particular process, and then the funders use a less generous process...
What happened to “operate on a model where they treat retrospective awards the same as prospective awards, multiplied by a probability of success.” Can you apply that idea to this case? I think the idea is incoherent and if not I want to know how it works. [This is the most important paragraph in this comment.] [Edit: actually the first paragraph is important too: if funders aren’t supposed to make decisions in a particular way, but just assign funding according to no prespecified mechanism, that’s a big deal.]
(Also, if the funder just pays $100, there’s zero surplus, and if the funder always pays their true value then there’s always zero surplus and this is my original concern...)
Sure. I claim this is ~never decision-relevant and not a useful concept.